The Union Cabinet has decided to withdraw the proposed the Financial Resolution and Deposit Insurance (FRDI) Bill after concerns were raised over the security of bank deposits, a report has said.
According to a report in the Indian Express, the NDA-led Central government took the decision during the protests by bank employee unions and state-run insurance companies on July 14. The Department of Economic Affairs was reportedly asked to prepare a withdrawal proposal for the Cabinet to approve. The proposal was passed during the meeting today, the report said.
The misconception that led to panic withdrawal of cash from banks was one of the reasons cited for the withdrawal, according to the news daily's report.
The FRDI Bill, the Centre claimed, was going to be instrumental in taking a more comprehensive approach towards a systematic resolution of all financial firms, including banks, financial intermediaries and insurance companies.
The financial crisis witnessed in 2008 urged for a specific resolution as many high-profile bankruptcies were exposed. The Bill comes together with the Insolvency and Bankruptcy Code, which eases the process for the winding up or revival of an ailing company.
The Centre, through schemes like demonetisation and Jan Dhan Yojana, has been encouraging people to engage more with the banking sector. With this, it has become critical to protect savers and those joining the formal economy in case a bank or an insurance firm begins to fail.
As per the statement by the government, the bill could help deal with bankruptcy situations in banks, financial sector entities and insurance companies.
The Bill was tabled in Lok Sabha in August.